Usually, the idea of taxes is met with some type of dread as some people usually fall behind on paying their taxes while others simply imagine the amount of money they have left after paying taxes and realize they haven’t enough to keep up with other bills. But taxes are things we must pay as adults and just maybe understanding more about what that piece of money is supposed to do, may give you some type of satisfaction that you are doing your little bit in making your community better.
Not that you don’t already know but I’ll go right ahead to define what tax is. Tax is some type of monetary payment required from the taxpayer by the government for very specific transactions or activities engaged by the taxpayer within the geographical area of the said governing body. It’s basically money you have to pay the government for living and doing business in your community. This could also come in form of some type of levy or public service in some cases.
There are different types of taxes the come from different places; for example you have to pay income taxes, this is usually taken from your pay check by your employer before it reaches your possession. If that is not done for you by your employer, then you have to do that personally.
If you run a business, you would also have to pay taxes to the government on all the profits you have made from month to month. This type of tax is known as direct taxes. Indirect taxes on the other hand are taxes paid on transactions made between consumers and retailers. These include the value added tax, the goods and service tax and so on.
So, one may ask, what taxes are used for? Well, the roads we drive on, welfare and other public projects are maintained by taxpayers money. Also, those who work for the state or government, the judges, police and so on, receive their salaries from the taxes citizens pay. So, you can imagine how efficient an administration can be if the finances coming in from taxes are used productively.
However, there are certain situations that could create complications with paying taxes on time. Since the payment of taxes are legally binding, then one can face serious trouble with the government if they do not pay their taxes. It is only safe to say that the government must have various ways to assist citizens get back on track if they may have missed on filing their taxes correctly or missed payments entirely.
Sometimes citizens may face various challenges that may cause for them to fall behind on paying their taxes. In cases like these, one of the things that can be done is to file for tax extension. The law allows you to file for a tax extension from the government so as to give you the much-needed time to file in your tax returns, however you will not be able to extend on your extension. So, if you fail to make your tax returns available by the end of the extension deadline, there would be penalties.
Table of Content
- WHY FILE FOR TAX EXTENSION?
- Know and calculate your tax commitment
- Major life changes
- Pay on time
- Pay attention to the numbers
- Prepare for debts
- PAY OWED TAXES
- BEWARE OF IDENTIFICATION THEFT
- USE TAX SOFTWARE PROGRAMS
- PICK A GOOD TAX PREPARER
- TAKE ADVANTAGE OF ELECTRONIC FILING
- DOCUMENT CHARITY DONATIONS
- USE LAST YEAR’S INFORMATION
- TAKE ADVANTAGE OF LOSSES BASED ON DISASTERS
- UNDERSTAND YOUR OPTIONS IF YOU OWE BUT CAN’T PAY NOW
- PREPARE FOR NEXT YEAR
- 11. CLEAR YOUR SCHEDULE
- 12. GET YOUR PAPERS TOGETHER
- 13. APPLY
WHY FILE FOR TAX EXTENSION?
If you do not have the ability to pay the tax required, filing for an extension will not give you an extension to pay the tax. This extension only works for filing the tax return, the payment is still due on the general due date and failure to make payments on that day will still carry its penalties based on the type of tax.
However, there are very understandable reasons why one may need to file for a tax extension, one of which could be if you are out of the location where your important tax papers are. Sometimes due to work or vacation, some folks may not have their tax papers with them, this will make them unable to file their tax returns, hence posing a valuable reason for filing an extension.
Another reason of course could be the fact that sometimes folks are just too busy with life that they procrastinate on the tax work to the point where they would need to file for an extension.
Another interesting reason why most people file for tax extension is due to missing papers or missing information needed to file their tax returns. There may be some vital documents needed for the filing process to be successful, but these documents may not have arrived from the agency. In these cases, filing for a tax extension would be necessary.
Some have sited delay in being audited as one of the major reasons for filing for tax extension. The way this works is that most of the auditors like to round up their auditing at the beginning of the year, so if a person files for tax extension which usually goes for thirty days to 6 months at a time, the auditors would have missed their window of opportunity to audit the person who filed.
HOW TO STAY AHEAD OF TAX PAYMENTS
Even with the possibility of having tax extensions, the entire work of tidying up your tax responsibilities may pile up on you and become somewhat of a nuisance. Below are just a few tips to help you stay ahead of the tax man not just for the short term but for always.
Know and calculate your tax commitment
Pay attention to all that’s going on with you financially, calculate all the various things you would be paying taxes on. Do you own a piece of property? Do you give to charity? What types of activities do you do that receives a tax deduction or exception.
If you are in business or self-employed, you would also have to understand all of your various tax commitments and how to go about paying them. Organize your finances, there is no better time to get organized than right now, procrastinating this may put you in an unfavourable position with the tax man.
Major life changes
Pay attention to various life changing occurrences like buying a home, loss of job or even a birth of a child. These types of life changing occurrences can affect your tax responsibilities immensely and paying attention to them or how they affect the way you pay your taxes will help you stay ahead of curve balls along the way.
Pay on time
Now that you are organized don’t wait until your taxes are due before you pay. Make sure you pay your taxes on time, as soon as you get your pay check or as soon as the finances come in.
Another way to ensure you pay on time is to establish a book keeping day, when you would go through all your financials for the week and then determine to pay all your bills, including your taxes on a specific day. If you commit to paying your taxes on time, you will stay ahead of the tax race.
Pay attention to the numbers
Like was suggested in the above hint, have a day weekly for personal book keeping. This is also where you take a look at all your receipts and purchases you made during the week. Pay attention to the numbers always.
Prepare for debts
It would be smart to be proactive about your tax requirements. Don’t wait until you fall into some type of trouble due to delayed payment on tax returns or any other hiccup that may come along the way.
Have a separate account where you put money aside for such an event if they happen. It would be better for you to already have a backup plan for any tax challenges that may come up, rather than looking for a solution when the event has already taken place.
13 TIPS ON FILING FOR TAX EXTENSION IN THE USA
PAY OWED TAXES
Don’t make the mistake of thinking that simply because you are filing for an extension you don’t need to pay what is owed. Like was stated in the introduction of this particular article, what you are filing for is simply and extension for filing not payment. You still have to make payment on the taxes that are due. So in as much as you are filing for extension, make your payments with what you have to avoid penalties.
BEWARE OF IDENTIFICATION THEFT
The Internal Revenue Service will usually make first contact with you through regular mail. Be sure to refrain from sending your tax details through the internet, except you are sure it is a secure online platform or if the website is encrypted.
Most people fall prey to identity theft during the tax season, as many people would be in the business of getting their taxes together and as has already being said it could be a very tedious process, where many forget to secure very valuable information. Do not make the mistake of letting your important tax files that have been copied on hard copy paper, lie just anywhere. Be sure to shred every documentation copy, or even burn them if you have to.
USE TAX SOFTWARE PROGRAMS
Put your data into a tax software program, this will really help reduce the amount of time you will spend trying to organise your taxes yourself. Some employers make this option available for employees. This software has various tools, functions and options that will help you optimize the entire process.
PICK A GOOD TAX PREPARER
Make sure you use a referral when picking a tax professional to help you prepare your taxes. Make sure you find out if they have the official Internal Revenue Service Preparer Tax Identification Number (PTIN). Pay attention to whether they ask for tax deductions that raises concern, wither they refuse to state their bill or ask you to make your refund deposited in their own bank account.
Ask about whether previous clients of theirs have had any problems with them in the past. The truth is that these people handle a lot of sensitive information and it would be very dangerous for such information to fall into the wrong hands.
TAKE ADVANTAGE OF ELECTRONIC FILING
Electronic filing can make the entire process easier, especially when you are running out of time. You can choose to file directly online or to use various software programs that will enable you achieve this purpose.
DOCUMENT CHARITY DONATIONS
Be sure to get some type of acknowledgement, usually written from the charitable donations you are giving to if you want to claim it as an itemized deduction. There are certain charitable organizations that use the Internal Revenue Service Exempt Organization, so make sure you check if the organization you are about to make the payment to is listed as one of them. This way you can get whatever advantages that come with making these donations.
USE LAST YEAR’S INFORMATION
For most people their tax situation may not change from year to year, so it is possible to simply use most of the information from the previous year in the present one and it would fit in just fine. However, you must pay attention to the very minute changes that may have taken place in the current year that may still affect your tax situation. Do not make the mistake of filing in information that is not consistent with your current tax status.
TAKE ADVANTAGE OF LOSSES BASED ON DISASTERS
First of all, you do not have to be a business to qualify for the benefits of operating loss. If you live in a disaster area, you can take advantage of that. These losses could relate to your home, household things or even your cars and other vehicles. This only goes to show that there are various policies that could be advantageous to you when putting your taxes together, even if you may be strapped for time due to some unexpected event.
UNDERSTAND YOUR OPTIONS IF YOU OWE BUT CAN’T PAY NOW
If you owe but cannot pay, it’s not the end of the world as there are actually options to help you along the way if the Internal Revenue Service believe it to be an honest mistake. You can simply apply for some type of plan that allows you to pay installments, you can go to the website and look for the agreement that will allow for this.
This saves you the fear that builds up when you think of the penalties joined with the interests that may come from failing to pay your taxes. The tax agents are out to help you as a sincere citizen looking to do the right thing.
PREPARE FOR NEXT YEAR
Make sure this scrambling to put your tax documents together does not happen again. Make sure that through the year you organize these documents and you make money available for the time when you will need to pay these taxes. If you are organized, you will be in the clear every year when the tax season shows up.
11. CLEAR YOUR SCHEDULE
The truth is that if you have arrived at where you need to file for an extension, then there is definitely a need to make time available for your tax work. Now on a normal week, you may not have had the time to sit down and do your tax preparations but, for the purpose of putting your tax responsibilities together and evidently getting your life back together, you just have to make the necessary sacrifices to get more time.
You may have to separate an entire weekend to make out ample time to look for necessary documents. So, call your friends and tell them you won’t be going out to see the game with them on that weekend. However, looking ahead, you will need to ensure that you create time to do your book keeping so that this situation would not happen again as we have already stated above.
12. GET YOUR PAPERS TOGETHER
Now is the time to look through all the receipts you may have gotten through the year and whatever other documents you need to ensure that you are able to file your tax effectively.
If possible, take last year’s tax documentation as well, because most of the information you will be putting in are going to be the same, except maybe some type of personal event may have happened in your life to affect your tax situation. Once you are sure that all your necessary documents are available then you can proceed to the next step.
Get your form 4868, fill this form and then submit. This is you formally filing a tax extension, make sure you do this on the due date for the tax season. The interesting thing about filing for this tax extension is that if you miss this deadline also you may face penalties and interests that may be more damaging to your financial life than anything else.
So while the government will give you up to about 6 months to get your act together, make sure you actually do the work needed. You can apply for this electronically on their official Internal Revenue Website or fill the forms physically.
Everyone has had times when they fell behind on their taxes, so knowing that there is a possibility to rectify the situation gives hope to those who may be falling behind. Tax extension is a onetime deal, once this extension is given to a person, they are not expected to miss their due dates again.
I believe this has been repeated all through this article for emphasis, because the penalties for missing the deadline of the extensions are worse than a lot of other penalties a person or business entity can incur. Another point that has been repeated in this article is the fact that applying for a tax extension does not affect the due date for your tax payments.
Usually those new to tax matters seem to think this is the case, but it is not, you still have to pay your tax dues when they are needed. One major point I would like to point out before I finally round off this article is to suggest that you seek professional help if your tax issues are beyond what you can understand.
Sometimes the tax obligations may get overwhelming especially if you are self-employed or a business owner. So, do not hesitate to secure the services of a tax professional when you are in doubt of how to go about sorting out your tax issues.
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